Singapore

SG Asian buyers ahead of the curve

Property buyers and investors from Asia are benefitting from new-build residential investment in London, according to new research published today.

The paper, produced by Cluttons - a leading UK property consultancy and chartered surveyors, notes the trend looks set to gain further momentum as growing demand from affluent renters delivers new avenues for long-term investment opportunities.

The last decade has seen an 80 percent increase in the number of private tenancies in London, and buy-to-let investors are capitalising on the rapidly expanding private rental sector and made up almost 15 percent of total residential sales during 2012.

In 2012, two of the largest international investments were new-build development opportunities outside of the traditional prime core of central London.

Malaysian buyers, for instance, accounted for four percent of sales of new-build residential properties, with the most notable residential investment being the purchase of the Battersea Power Station site, across the river Thames from Chelsea, for £400 million by a consortium.

Hong Kong investor Knight Dragon invested more than £500 million in a joint venture with Quintain in East London’s Greenwich peninsula for a scheme adjacent to the O2 Arena that will include 10,000 new homes.

The relative weakness of sterling, which has lost almost seven percent against the Singaporean dollar and close to 5.5 percent against the Chinese Yuan so far this year, is further strengthening the case for London investments.
The research also notes that new-build housing stock offers strategic opportunities for international and domestic residential investors. These new build homes are more efficient, often have lower management costs and can be tailored to match different renter profiles.

New-build accommodation can also achieve a rental premium due to location and quality and are attractive to professionals who continue to be drawn to the British capital, particularly those in median to upper income groups.

Bill Siegle, Senior Partner with Cluttons, said: “Given that the average price of apartments in prime central London has breached the £1 million mark for the first time, it is ever more important to cater to the growing pool of renters, for whom home ownership in London continues to move further out of reach, with our forecasts suggesting a 25 percent surge in capital values over the next five years.”

“Outside prime core, higher returns are available. Our research shows that gross yields in these areas are more favourable. Buyers are already looking at locations that were previously perceived to be more secondary, as improved transport links, better value for money and burgeoning demand ripples outward from central London.”

Siegle added that robust capital value growth has impacted on gross residential yields across prime central London. Yields dropped to 3.69 percent during the first quarter of 2013, the sixth consecutive quarter of decline, according to Cluttons’ Q1 2013 Residential Investment Monitor.

Despite this, the research predicts that rental value growth in London will outpace capital value growth in London over the next decade due to the imbalance between supply and demand, particularly from growing affluent renter groups, he added.

Since 2000, an extra 400,000 jobs have been created and as a result, there are now more people employed in London than at the 2007 economic peak. This has placed tremendous pressure on the capital’s housing stock. However, demand has not been matched by supply, pushing house prices up and forcing would-be home owners out of the market, into a rapidly expanding pool of renters.

Andrew Batt, International Group Editor of PropertyGuru, wrote this story. To contact him about this or other stories email andrew@allproperty.com.sg